A legislative audit found that the Arkansas PBS Commission circumvented and violated certain aspects of state procurement law by, among other actions, making several purchases just below a threshold required for obtaining bids.
After questioning administrators with Arkansas PBS on Thursday, lawmakers on a standing committee of the Legislative Joint Auditing Committee opted to continue their review of the audit for fiscal year 2022 in the panel’s meeting next month to allow officials to gather answers to pending questions.
“To me, this looks like a good ole boy system going on,” said Rep. Justin Gonzales, R-Okolona, who made the motion to continue the review of the audit. “It may not be, and I hope it’s not, but the optics of this are pretty terrible.”
Courtney Pledger, chief executive officer of Arkansas PBS, told the Standing Committee on State Agencies there was no intent by Arkansas PBS to circumvent state law. She described the agency as a “lean operation” strained by high workloads on short timelines in recent years.
“We’ve transformed since 2017 to the point where everyone in the building has more than a full-time job. Then on top of that, we received an influx of federal funds over the past several years that gave us opportunities to do things that were over and above our usual workload,” she said. “We were unable to supplement our full-time staff because it was one-time money.”
Pledger noted the agency did not have any audit findings in fiscal year 2020 or 2021.
“Nothing has changed our commitment to compliance. We recognize these audit findings and are finding ways to address [them],” she said. “We have a solid plan moving forward.”
As part of their review, auditors selected 10 vendors used by the Arkansas PBS Commission with transactions both above and below the $20,000 threshold in state law for obtaining bids.
Auditors found on multiple occasions the agency entered into agreements to procure goods and services from two companies owned by the same person. If the goods and services had been obtained from the same company, bids would have been required, auditors said.
Karen Watkins, chief financial officer for Arkansas PBS, noted she had joined the agency after fiscal year 2022 but said it was her understanding that Arkansas PBS contracted with a company that was the only provider of certain equipment needed for a project in the region. In its written response, the agency said it contracted with a second company that provided certified skilled technicians to operate the specialized equipment.
Watkins said the second company was registered shortly before the contract was awarded.
“It looks fishy to split services across two contracts and have one company incorporated very shortly before the contract was awarded,” she said. “We’ve had a lot of internal discussions about this. It will not be happening in the future.”
Watkins noted positions at the agency, including the chief financial officer and procurement coordinator posts, had changed hands since the contracts were issued.
Rep. Marcus Richmond, R-Harvey, questioned why several officers had left the agency in recent months.
“Where did they go? Why did they go? It seemed like a whole lot of people decided to go do something else,” he said.
Pledger said the agency’s former chief financial officer left in September. Other personnel changes took place after Watkins arrived at the end of January and at the beginning of February after Watkins conducted an assessment.
“I did an assessment when I came in of the responsibilities of each team member and their performance,” she said. “Some of these issues we’re talking about today impacted the staff turnover.”
Watkins said she preferred “not to say too much,” noting that the agency is facing a lawsuit related to the termination of an employee.
“It’s OK to say you were unhappy with the performance of some of these people?” asked Richmond, to which Watkins nodded.
Sen. Jimmy Hickey, R-Texarkana, asked if Arkansas PBS had checked to ensure there are no “relationships, no business dealings or anything” that could have influenced contracts.
“I do not suspect fraud is going on at all,” Watkins said. “We have a very hard-working team and the main issue is that we have bitten off more than we can chew as far as workload.”
Watkins said the agency had struggled to manage an expansion project and three demanding education projects.
“It’s the right thing to do for kids and for the emergency broadcast system for Arkansas, but it really strained the agency,” she said.
Rep. DeAnn Vaught, R-Horatio, questioned why the agency couldn’t turn down large projects if it was already overburdened. Pledger said the projects were priorities for the Department of Education.
The Arkansas PBS Commission also made numerous purchases just below the $20,000 threshold for obtaining bids, according to auditors.
Pledger said the agency had during a short time 327 individual video projects that had to be completed within a three-month window.
“They were all separate vendors, and none of them were done with the intent of avoiding procurement,” she said.
Auditors said in their findings the agency also regularly paid for a portion of goods and services before they were obtained.
While Watkins said she did not have specific insight into these findings, she noted that for some projects Arkansas PBS has to hire freelancers to perform work, including building sets. Since these freelancers often do not have enough personal cash flow to purchase materials, they may be paid in advance to cover costs.
“It could be that for fiscal year ’22, there were some instances similar to that,” she said.
In its written response to the findings, the agency said it is “industry standard practice” to provide upfront funds for certain creative services, including animation, development of a character and pre-production planning.
The agency also regularly informed vendors how much they would pay for goods and services, according to the audit. While this practice doesn’t appear to violate a specific purchasing law, auditors said it raises questions of whether a vendor would have charged less had the agency not provided the information.
The agency often executed an internally generated scope of work agreement with vendors instead of a purchase order. This means goods and services may have been procured before purchase orders were created, according to the audit.
Auditors recommended the agency strengthen internal controls to comply with requirements of the state procurement law and guidance within the State of Arkansas Financial Management Guide.
Lawmakers on Thursday also reviewed an audit which found the Administrative Office of the Courts improperly coded a total of $231,025 in payments for jury reimbursements.
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